Blimey, being an economics prof is more glamorous than I thought!

Mark Perry lists the things he used in one day:

Mexico (NAFTA member): Blackberries, avocado, Lee jeans

2. Guatemala: Bananas

3. Sri Lanka: Cinnamon

4. Colombia: Coffee

5. Canada (NAFTA member): Maple syrup, Carr’s crackers

6. France: Ciroc vodka, Pinot Noir wine

7. Switzerland: Gruyere cheese, Rado watch

8. China: Grey cashmere scarf (pictured above), leather gloves (pictured above), Jos A. Bank leather jacket, HP Elitebook laptop I’m using to write this post.

9. Korea: Stocking cap (pictured above), and Samsung Avant Galaxy Smartphone

10. Vietnam: Shirt

11. Portugal: Ecco Shoes

There are some errors in there of course. No economic journalist, as opposed to a professor, would make the mistake of drinking French vodka for example. And maple syrup on either gruyere or bananas seems to be going a bit far.

An excellent piece by Brad Delong here

I often don’t agree with him and I don’t with all here.

But this is an excellent piece:

Adding up the effects of the much-maligned trade agreements
The relative decline in employment in manufacturing since World War II is the biggest structural change, or evolution, to hit the American economy over the past half-century. Politicians, with their preference for truthiness over the facts, attribute roughly all the 22 percentage point decline since 1971 in the manufacturing employment share to NAFTA, to China’s entry into the WTO, and to a few other scattered “corporately backed unfettered free trade agreements.” But — I really would like to drive this home — the worrisome part from trade is not the decline in the manufacturing job share from 30 percent to 12.2 percent, but the “excess” decline from 12.2 percent to 8.6 percent. That worrisome part of the decline of the manufacturing job share is, roughly, only one-sixth of the total decline: 3.6 percentage points. And the amount of decline attributable to the two big bad trade agreements is only one-tenth of that: 0.36 percentage points.

In sum, we can attribute a mere one-tenth of the excess reduction relative to Germany in the manufacturing job share to NAFTA and to China joining the WTO.

Dear God these people are ignorant

A sexism row has erupted over a new Barbie doll which encourages girls to become engineers by building washing machines and racks for their shoes and jewellery.

No, not that bit, this bit:

Jo Jawers, a spokeswoman at campaign group Let Toys Be Toys, accused the Engineering Barbie of “pinkifying” science, adding that it risked sending out a message that domestic machinery is used primarily by women.

She added: “While the doll is a step in the right direction it’s a real shame the things the girls can build relate to domestic chores while boys get the whole of the rest of the world. Arguably the washing machine is greatest invention of the 20th century but its not a women’s machine. We don’t want the message to be that the washing machines belongs to the girl.”

Twat. Damn near the entire Industrial Revolution has been about automating women’s work. We’ve still not quite managed to crate children properly but the first step was to automate the largest part of any woman’s working life, spinning. Seriously, the number of hours of hand spinning that went into even the homeliest of home spun shirt was horrendous. Then came weaving, in this century that washing machine and…..running a household has gone from being a full, full (60-80 hours a week) time occupation to being something that can be done in the small gap between getting home and wine o’clock.

The Spinning Jenny and the Washing Machine are, arguably, the two inventions that made women’s liberation possible.

So, we’re getting the guilds back, are we?

She will say the government would be prepared to deregulate, help with trade deals or create new institutions to boost skills or research if any sector can show this would address specific problems.

The deals will only be available to sectors that organise themselves and make the case for government action, with May citing the automotive and aerospace industries as sectors that have successfully used this model.

Idiot stupidity.

Willy Hutton really, really, just does not understand economics, does he?

One of the core concepts of economics, and in particular conservative philosophers, is that individuals have immutable values and preferences: that not only is economic woman rational in the way she behaves, but she has worked out what she values, ranks and prefers before she interacts with the economic world. One of the great conservative intellectual triumphs – the so-called impossibility theorem – is to show that if this is true and there is no external authority enforcing choices on people, it is algebraically impossible for individuals to arrive at a commonly agreed decision that improves all their welfare. So much for liberal do-gooders! Their desire to meddle, to tax, to spend will end up improving no one’s lot.

1) The assumption is not that values and preferences are immutable. It is that they are consistent. And that is all that the word “rational” there means. If she prefers bananas to apples and apples to pears then she prefers bananas to pears. This is not a strange nor constraining assumption about human beings.

2) The impossibility theorem states no such thing. What it does say is that if preferences differ then we can’t please everyone with just the one decision. To bludgeon the point home, in a community of 50 men and 50 women we have one man who thinks rape is just great, 49 men and 50 women who think it ain’t. There is no position upon the allowance or non-allowance of rape which will meet everyone’s preference.

All of which is a bit of a problem for Willy as he’s interviewing Amartya Sen. Who makes only the entirely reasonable arguments that Willy’s understanding, as with all too many other people, of what is being said isn’t wholly correct.

Err, yes, so, how exactly?

It was against this insurgency of a cornered establishment that had given up on persuasion that Donald Trump and his European allies rose up with their own populist insurgency. They proved that it is possible to go against the establishment and win. Alas, theirs will be a pyrrhic victory which will, eventually, harm those whom they inspired. The answer to neoliberalism’s Waterloo cannot be the retreat to a barricaded nation-state and the pitting of “our” people against “others” fenced off by tall walls and electrified fences.

The answer can only be a Progressive Internationalism that works in practice on both sides of the Atlantic. To bring it about we need more than fine principles unblemished by power. We need to aim for power on the basis of a pragmatic narrative imparting hope throughout Europe and America for jobs paying living wages to anyone who wants them, for social housing, for health and education.

Only a third insurgency promoting a New Deal that works equally for Americans and Europeans can restore to a billion people living in the west sovereignty over their lives and communities.

Might we, Yannis, just have a tad more detail about what it is that will be done once in power? An inkling of what you might actually do if you get your feet under the table once again?

The Guardian will be praising this, won’t they?

Despite rising earnings inequality among working households, inequality in total net household incomes (including benefits and after taxes) across the vast majority of the population is actually lower than 20 years ago. Key reasons for this include tax credits boosting the incomes of low earners, a catch-up of pensioners with the rest of the population, and falling rates of household worklessness.

Yes, yes, we know this

Putting together official figures and the Bank of England’s own calculations, it looked at regional GDP per head from the capital up to Scotland. And it showed that only two regions of the total 12 were actually richer than they were before the credit crunch. Those two regions were London and the south-east. Nearly everywhere else was poorer than in 2007 – sometimes, as in Northern Ireland, a lot poorer.

It’s also true that the UK has one of the greatest (second largest I think) differences in regional GDP in the EU. That’s because we’ve got London, which is a global city, part of the global economy and rich because of it, then we’ve got the rest which is pretty much a mid level European economy and all rather Meh.

However, there’s another way to look at the same figures. If you map GDP per capita across those regions, then public sector as a percentage of GDP by region, you’ll see that the poorer areas have more public spending.

That is, government makes you poor.

A bit of proper economics

Gravity modelling is Newtonian physics adapted for economic forecasting. Just as the attraction between two heavenly bodies is directly proportional to their masses and inversely proportional to the distance between them, so the volume of trade and the amount of foreign direct investment between two countries depends on how big and how geographically close they are.

Using this approach, the Treasury says there would be a 43% loss of trade with the EU were the UK to revert to WTO rules, and because almost half the UK’s trade is with the EU this would result in a 24% loss in total trade. The assumption is that there has been a 76% increase in UK trade as a result of membership of the EU and that all of these gains would be lost. There would be no gains in trade with non-EU countries to compensate for the loss.

The gravity model is the standard trade model. And I don’t think it’s right. As in an email I’ve just sent:

Small thought about the gravity model of trade.

Historically geographic closeness might have made sense as a measure. At some time that is. But if we cast further back not so much. Say, just to invent an example, trade over the Pennines was at one time much smaller than trade over the Irish Sea. Ship and river transport was much more important than road (there were no roads).

Or coal from Newcastle to London by ship but near nothing from Newcastle to Carlisle.

The gravity model should thus be tweaked to measure economic geography, which methods of transport are in use? Or, how close is somewhere in travel days, not miles? Travel cost perhaps not miles.

At which point much more makes sense. The container network will move 30 tonnes of anything anywhere for under $5,000 these days. Geographic proximity, what that gravity model assumes, is rather less important.

In fact, transport costs between Birmingham and Barcelona, Birmingham and Birmingham AL and Birmingham and Brisbane are not notably different these days.

Gravity as measured by trade costs rather than geography would make much, much, more sense.

There’s a great deal of truth here

Almost a decade later, the Queen might be tempted to lob another grenade at the economics fraternity: why did you get it wrong again about Brexit?

In fairness, the economics profession had its Cassandras in the run-up to the financial crisis and not all economists thought a vote to leave on 23 June meant instant Armageddon. Even so, it is a valid question. How can it be that the Bank of England, the Treasury, the IMF, the OECD, not to mention the vast majority of academic economists, all predicted so confidently and yet so wrongly that the UK economy would plunge straight into a stonking great recession after a Brexit vote?

On both occasions, economists have been guilty of groupthink. On both occasions they pretend to have forecasting powers that don’t really exist. As the economist Paul Ormerod points out, in the short term it is nigh-on impossible to sort out genuine information from noise.

But is everyone going to learn the right lesson from this?

If we cannot forecast what is about to happen then how in fuck can we plan the economy?

Well, quite, at this macro level we simply cannot, can we, because we simply do not know what is about to happen nor can we accurately model the effects of whatever we might do about it.

So much for the Curajus State then, eh?

And, of course, that kills off absolutely everyone further left who wants a properly planned economy, doesn’t it?

Well, yes, quite so

The Brexit forecast was in a different category. It was like the “dodgy dossier” of the intelligence community on Saddam’s weapons arsenal. It was experts distorted by politics, consciously or unconsciously saying what they or their paymasters wanted to hear. It was “sexed-up” science.

The reasons given by economists for their Brexit forecast are feeble. It did not take account of “inherent momentum”, of international factors or of government remedial action. That is surely inadequate. The true reason is that Project Fear, the Treasury-orchestrated attempt to frighten voters into the remain camp, consumed the political and intellectual establishment. It blighted the judgment of social scientists. It not only failed in its purpose of instilling fear, it appeared to validate a bogus reason for voting Brexit – that all experts are mendacious toffs.

As some of us were saying at the time. Policy based evidence making.

Socialist thinking

‘The five biggest French banks made a profit of 25 billion euros last year, so I propose a supertax of five billion euros,’ said Montebourg.

Big pot of money! We’ll have some!

With no thought whatsoever as to what that big pot of money currently does before it is taxed.

Sigh.

Blimey, this is a surprise, isn’t it?

Britain’s wealth gap will be passed down the generations as well-off older people bequeath property to their already thriving offspring, according to new research from one of the UK’s leading thinktanks.

The Institute for Fiscal Studies (IFS) found that today’s young people were likely to inherit more wealth than their predecessors but the benefits would be skewed to those who were already well off.

Rich people are rich.

Alert the media!

There’s a solution to this you know

More than 2.3 million families are living in fuel poverty in England – the equivalent of 10% of households, according to government statistics.

Stop making energy more expensive with green taxes.

And an interesting question to which I know the answer but cannot actually prove so.

If we take the definitions of adequate heating of today (there are details of how much of the house should be heated to what temperature for what period of the day, no, really) and that definition of fuel poverty, no more than 10% of income being spent to reach it, well, how many households were in fuel poverty in 2000? 1990? 1980? 1900?

At some point going back we find that the Duke of Westminster was in fuel poverty. And at some interim point we find that just about everyone else was and so on decreasing, perhaps, to this 10% today.

The question, in the end, being well, when was fuel poverty lower than it is today? By today’s heating standards that is?